From volatility to value: How CPPAs deliver long-term energy security
How can a Corporate Power Purchase Agreement support cost certainty and contribute towards demonstrating your sustainability ambitions?
Corporate Power Purchase Agreements are a popular choice for corporations looking to benefit from renewable energy in the long term, supporting cost certainty and helping to reduce their carbon emissions.
What are CPPAs?
A CPPA is a long-term energy contract between a corporate customer and a renewable power generator/developer – an increasingly popular choice for organisations seeking to decarbonise. The most widely adopted mechanism in the UK is a physical (or sleeved) CPPA.
In practice, having a CPPA means the energy you use can be traced back to a specific renewable energy project, such as a wind or solar farm, which feeds an equivalent amount of power into the grid. This means your premises and the project in question can be located at the opposite ends of the country.
How can a CPPA achieve this?
Price stability
By fixing a percentage of their energy budget for the long term, corporations can gain cost certainty for a portion of their energy volume, while trading the remaining energy through dedicated risk management.
This approach provides bankability for the development of new renewable assets in the UK (known as additionality) and offers financial certainty regarding energy costs in future years.
While a CPPA cannot guarantee lower prices in the long term, a Physical Sleeved Power Purchase Agreement can significantly reduce the financial risks associated with volatile energy markets, thereby minimising risk exposure.
However, an experienced expert partner will thoroughly investigate all options available to your organisation before deciding on the best route.
Supply certainty
Both new and existing assets provide transparency regarding renewable energy sources through the provision of Renewable Energy Guarantees of Origin (REGOs).
A REGO is a certificate that provides traceability for where your energy has come from, measured in megawatt-hours (MWh). Your power will come from a named UK renewable asset to deliver long-term certainty.
Sustainability benefits and net zero ambitions
For businesses setting Science-Based Targets (SBTs), a CPPA can help reduce your Scope 2 emissions when reported using a market-based approach.
Both new and existing assets provide transparency of the renewable energy sources and will contribute to demonstrating your Environmental, Social and Governance (ESG) commitments.
What is next for CPPAs?
Looking ahead, 2026 and 2027 are expected to see significant growth in the CPPA market due to changes in Contract for Differences (CfD) legislation – another route for bankability of CPPAs.
However, challenges arising from the increasing operational costs of offshore wind, such as the recent withdrawal of planning consent for Hornsea Four, remain.
Other considerations include Review of Electricity Market Arrangements (REMA) and effects of UK’s net zero target (which requires development of the UK grid to move to 50% more renewable capacity) – leading clients to increasingly examine how they can incorporate a CPPA into their risk management strategy.
How can Inspired help?
A CPPA differs from traditional procurement from a supplier, both in duration and nuance. Therefore, having an expert partner is key.
Inspired’s managed CPPA service supports you every step of the way, from matching your volume requirements, a CPPA structure that works for your business and timescales with an approved developer to in-life management.
If you would like to discuss how our experts can support you, please email us at [email protected]
